Collateral efficiency and process harmonization at B3

By Cinnober - 2018.01.24


In August 2017, phase two of B3’s post-trade integration project passed a major milestone. The new equities and corporate bonds platform went live and completed the second step towards an integrated clearinghouse, which began over three years ago when the first phase launched with the derivatives market.

Rodrigo Nardoni-872806-edited.jpg
Rodrigo Nardoni, CIO, B3

We got the chance to talk to Rodrigo Nardoni, CIO at B3, while he was in Stockholm last month and asked him a few questions about the benefits of having an integrated platform, the reactions from clients, and the history behind the post-trade integration project (IPN).

What is the history behind the post-trade integration project?

The post-trade integration project began in 2010, as a result of the merge between BM&F and BOVESPA in 2008. The new company had four different clearinghouses, which meant four different vertical structures, four different processes, and four different technologies. One of the first questions that the newly formed company started asking was, what makes sense in the future? To have four different structures or to only have one, multi-asset system?

B3 decided that the answer was to try and harmonize processes, the technology, and bring efficiency to the market. The main target of the post-trade integration project was to have one multi-asset platform to make it possible for clients to only have to pledge collateral once and to settle positioning along with allocation on one platform, with one settlement window. That’s what the integration of the post-trade platform is all about. 

What are the main benefits resulting from the project?

The main benefit for B3 is that we have exchanged an old system with many different technologies for an up-to-date platform using TRADExpress RealTime Clearing as the backbone. We now have a more flexible, stable, and secure system to provide services to the market.

The main benefits to the market are collateral allocation efficiency and process harmonization. With our new protocol of communication, it is now closer to international trends and the new technology is good for the market as we are now prepared to reach and receive new, higher volumes, which is good for both B3 and the market.

“When the second phase launched back in August 2017, around 6.5 billion USD was released in the name of capital allocation efficiency.”

How has the reaction from your clients been after the launch of the first two phases?

They were very satisfied and happy because we have reached all of the targets that we had established at the beginning of the project. Our primary goal was to reduce the amount of collateral pledged, ultimately giving it back to the market, and I think that was the most important for our clients. Of course, the harmonization process was also very important only having one settlement window during the day, which is something very good for the market, B3, and the regulators. 

How have the operations of the new platform been since the initial launch in 2014?

Since the launch of the new clearinghouse with the derivatives platform in 2014, operations have been easy to handle. The platform is reliable, stable, and has received higher volumes without any major issues or problems.

This is very satisfactory — as we were expecting volumes to grow as an effect of the post-trade integration project which is exactly what we did, and we’ve been capable of handling those volumes without any problems.

How do you think trading volumes will develop going forward?

We have good expectations on trading volumes — we can see that internal interest rates are dropping fast and have reached their lowest level in years. We are expecting that the stock market will have more demand next year, but there is a question mark here as everything will depend on who wins the election next year, and that is how we are looking towards the future.

What are the next steps?

We have now reached our main targets which were to bring derivatives and equities, the most important parts of our business, into the same clearinghouse. Now, we have a T+2 settlement process to be implemented. We currently have T+3, and the U.S. went live with T+2 in September. We are now studying the market to see when the most appropriate time would be to do the same in Brazil.


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